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CORPORATE SOCIAL RESPONSIBILITY (CSR) IN


TRANSNATIONAL SPACES: ANINSTITUTIONALIST
DECONSTRUCTIONOF MNCS CSRPRACTICES IN
THE NIGERIANOIL AND GAS SECTOR
Kenneth Amaeshi
*
and Olufemi O. Amao
+
CSGR Working Paper 248/08
July 2008
*Warwick Business School, University of Warwick, United Kingdom
+Faculty and Department of Law, University of College, Cork, Ireland
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Corporate Social Responsibility (CSR) in Transnational Spaces: An Institutionalist
Deconstruction of MNCs CSR Practices in the Nigerian Oil and Gas Sector.
Kenneth Amaeshi and Olufemi O. Amao.
CSGR Working Paper 248/08
July 2008
Email: Kenneth.Amaeshi@Warwick.ac.uk
Abstract
Drawing from the varieties of capitalism theoretical framework, the study explores the home
country influences of MNCs on their CSR practices when they operate outside their
national/regional institutional contexts. The study focuses on a particular CSR practice (i.e.
corporate code of conducts) of seven MNCs from Europe (4) and the USA (3) operating in the
oil and gas sector of the Nigerian economy. The study concludes that the corporate codes of
conduct of these MNCs operating in Nigeria, to a large extent, reflect the characteristics of their
home countries model of capitalism, respectively. The home countries model of capitalism is
also found to have implications for the degree of adaptability of these MNCs CSR practices to
the Nigerian institutional context. It is anticipated that the study will contribute to the
emerging literature on the institutional embeddedness of CSR practices in trans-national spaces
and that of CSR in developing economies.
Key words: Comparative CSR, Varieties of Capitalism, MNCs, Oil and Gas, Nigeria
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INTRODUCTION
Corporate social responsibility (CSR) discourse has, in the main, been dominated by
managerialist thinking (Amaeshi, 2007). This managerialist approach to CSR tends to
place managerial choice and rationality at the heart of organisational pursuit of CSR.
Owen et al. (2000) succinctly describe this manager-centric approach to CSR as a
managerial capture of CSR. Whilst the managerialist approach could be a way of
discussing and understanding the contemporary CSR movement, it tends to place
excessive emphasis on managers, as uber-actors who appear to display unlimited powers
in enacting their practices, irrespective of structural constraints inherent in their
institutional contexts. On one hand, the attention paid to managers in this instance
raises the societal expectations of managers to be held accountable for their practices,
even where there are obvious institutional lapses (e.g. Enron case); and on the other
hand appear to downplay the constraining and enabling characteristics of the
institutional contexts in which these managerial practices are embedded and enacted.
In other words, the managerialist approach to CSR tends to dominate and occlude
other useful perspectives in the extant literature. One of these views that have been
marginalised for a long time now is the institutionalist perspective which emphasises
the role of contexts in shaping and influencing managerial practices (Lounsbury, 2007;
Whittington, 2006; Gray, 2002).
However, since the last decade or so, interest in the institutional dimension of CSR
practices is beginning to emerge (e.g. Langlois and Schlegelmilch, 1990; Jones, 1999;
Husted and Allen, 2006; Aguilera et al., 2006; Campbell, 2007; Matten and Moon,
2008). A common strand that runs through most of these studies, suggests that
meaning and practice of CSR is institutionally bounded. Matten and Moon (2008), for
instance, use their explicit and implicit model to explain the difference between
Continental European and North American versions of CSR practices. They suggest
that whilst the explicit style characteristic of North American firms CSR is vociferous
about its contribution to the society for example in provision of healthcare,
education, employee welfare and other social amenities the implicit style
characteristic of Continental Europe finds it less attractive to report such social
provisions as contributions to the society, since these provisions are already taken care
of by the national institutions in which they operate. The UK governments national
healthcare service (the NHS) has been providing free healthcare service to its citizenry
since the 1940s and the German system has ensured that employees welfare gets top
priority in organisations through its co-determination approach to corporate
governance (Jackson, 2005; Aguilera et al., 2003).
This paper leverages this institutionalist trend and tradition to examine CSR practices
of MNCs when they operate outside the shores of their home countries and regions
1
.
To give the study a narrower focus, the study takes on a specific CSR practice
corporate code of conducts
2
amongst multinational corporations (MNCs) in the
1
Regions as used here will include both geo-political and geo-economic configurations (e.g. Europe,
North America, et cetera)
2
It is important to point out that the inclusion of corporate code of conducts as part and parcel of CSR
gamut of practices has been recently challenged by Bondy et al. (2006). Bondy et al., rather see corporate
code of conducts as artefacts of corporate governance, which could be extended to the practice of CSR.
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Nigerian oil and gas sector. The interest in corporate code of conducts and the
Nigerian oil and gas sector is not arbitrary. In the first instance, it has been argued that
a major rationale for the adoption of corporate codes is that they allow corporations to
demonstrate their willingness to take responsibilities and at the same time define the
limits and extent of the responsibilities (Salahuddin and Tsoi, 2003). Although
Langlois and Schlegemlmilch (1990) found in their study of European firms in Europe
and American firms in the United States that corporate codes of ethics reflect national
character, not much is known in relation to: if and how these national characters are
sustained and maintained when MNCs operate outside their home countries or
national/regional institutional contexts especially when they operate within
institutional contexts that do not bear resemblance to their home country or regional
contexts. Given that the institutional contexts of most African economies have been
described to be characterised by fragmented (Whitley, 1999) and segmented (Frynas et
al., 2006) national business systems, the Nigerian oil and gas sector provides a fertile
and novel empirical site to explore the main research problematique of this paper
which is to explore if and how corporate codes of conduct of MNCs operating outside
their national institutional contexts reflect the characteristics of their home country
contexts. In other words, to what extent does MNCs corporate codes of conduct
mirror their home country institutional characteristics when they operate in non-similar
institutional contexts? A second reason for choosing this novel empirical site is that
CSR practices are most prominent in the oil and gas sector in Nigeria and among
Multinational Corporations (MNCs) (Amaeshi et al; 2006). The major tools of CSR
employed by MNCs in Nigeria include corporate codes of conduct, voluntary social
reporting and community development projects. In recent times multinational
corporations in Nigeria have resorted to emphasizing and publicizing their codes of
conduct to show their commitment to the social and environmental conditions of their
operations.
The research problematises corporate codes of conduct as contemporary or emergent
organisational practices that need to be understood from a different lens apart from
those of managerial rationality, which have dominated the extant literature on
corporate accountability, corporate governance, corporate social responsibility and
stakeholder management as a strategic management practice. The lens chosen for this
study is the comparative political economy perspective particularly those of
comparative business systems (e.g. Varieties of Capitalism). The paper is set out in the
following order: first, it explores corporate codes of conduct as artefacts of CSR in a
broad sense of the construct; secondly, it extends the CSR practice to the comparative
capitalism discourse. It further discusses MNCs in the Nigerian oil and gas sector; and
explores how their corporate codes of conduct reflect (or do not reflect) the
institutional contexts of their home countries or regions. The implication of the latter
is the relevance of such code within the local context. The areas covered by codes
initiatives of MNCs in this regard generally include human rights, labour issues,
transparency: bribery and corruption, employees welfare, environmental issues,
disclosure of information and consumer protection (Shell, 2006; Amadi et al, 2006).
In this paper, we will use the CSR construct in its broadest sense to cover such practices as corporate
governance, sustainability and accountability.
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CORPORATE CODES OF CONDUCT IN PERSPECTIVE
Codes come in different types and shades. Typology of codes is usually based on the
authorship of the codes. In a study of 258 codes carried out for the ILO by Urminsky
(2002), he found that 67% of the codes were devised by corporations themselves, 11 %
by trade associations; 7% by NGOs; 8% by framework agreements, 3.5% by workers
organizations and 0.4% by government bodies. Jenkins (2001), while recognising the
fact that codes come in a wide variety and the attendant confusion that follows such
proliferation, has identified five main types of codes. These are:
Corporate or company codes
Trade association codes
Multi stakeholder codes
Model codes
Intergovernmental codes
Corporate or company codes are voluntary rules that have been formulated by
individual companies. These codes constitute the largest number of codes today. These
codes have no uniform format. They differ both in scope and in content depending on
the commitment of the firm adopting them. Trade association codes are also
unilaterally and voluntarily adopted by a group of firms in a particular industry. Multi-
stakeholder codes are negotiated among stakeholders, which usually include firms or
their industry representatives, Non Governmental Organizations (NGOs), Trade
unions and sometimes governments. Model codes are drawn up mostly by NGOs and
trade union movements setting out what these organization think is the ideal and
should be the benchmark in a particular sector. Intergovernmental codes are negotiated
at international level between national governments. In this study we would be
concerned with corporate codes.
In a survey carried out by the OECD (2001), eight major areas of coverage were
identified in the corporate codes of conduct. These include environmental stewardship,
labour relations, disclosure of information, competition, taxation, bribery and
corruption, science and technology and consumer protection. A breakdown of the areas
covered and their frequencies are presented in the table below:
Areas covered
Frequency (from 246
codes) %
Labour Relations 148 60.2
Environmental Issues 145 58.9
Consumer protection 117 47.6
Competition 56 22.8
Information disclosure 45 18.3
Science and Technology 26 10.6
Taxation 1 0.4
This may be compared with a similar study carried out by Carasco and Singh (2003)
which studied the content of the worlds 50 largest multinational corporations. The
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study found that the items most often emphasized i.e. fully pay attention to are
relations with customers/suppliers(34%), relations with employees(38%), relations with
foreign governments(31%), environmental affairs(34%) and giving of
bribes/kickbacks/entertainment(34%).
Corporate codes of conduct come in different forms which perhaps explain the
different definitions that have been proffered for the concept. According to Langlois
and Schlegelmich (1990) the concept is the statement of corporate principles, ethics,
rules of conduct, codes of practice or philosophy concerning responsibility to
employees, shareholders, consumers, the environment or any other aspect of society
external to the company.
3
Implicit in this definition is the recognition by firms of duties
to stakeholders beyond stock or shareholders. Schwartz (2001) bases his definition of
the concept on morality. In his view codes of conduct represent the acceptance of
moral imperative by companies to help guide employees or corporate behaviour.
Brinkmann (2002) also defines them as maps of expected moral conflicts, the
corporations response to such conflicts and the predictable sanctions in case of non
compliance by the responsible person. Similarly Frankel (1989) posited that a
professions code of ethics is its most visible and explicit enunciation of its professional
norms. It embodies the collective conscience of a profession and its testimony to the
groups recognition of its moral dimension. Corporate codes of conducts have also
been defined as statements of business principles, which a company undertakes to
abide within its business operations (Forcese, 1977). Bethoux, Didry and Mias
(2007:78) posited that codes of conduct represent a heuristic tool through which
companies enter into a discourse about themselves. For the purpose of this study,
however, codes of conduct will be used in a narrow sense as: voluntarily written
declarations of companies commitment to address the social and environmental conditions of
their activities.
The above definitions embrace the major characteristics of corporate codes found in
the literature. They are: that codes demonstrate a corporations willingness to take
responsibility; that they are designed by corporations; that they are voluntary and not
legally binding; that they are concerned with the management of externalities of
business; that they introduce ethics and morality into the business management and
that they are part of a business organizations strategic planning. It must be noted that
the above definitions and characteristics are not exclusive to corporate codes of conduct
as other types of codes share these attributes. However, one thing they share in
common is their emphasis on managerialist orientation to corporate codes of conduct.
CORPORATE CODES OF CONDUCT, MANAGERIAL CHOICE AND NEW INSTITUTIONALIST
PERSPECTIVES
Contrary to the under socialized view of managerial discretional rationality that
has dominated the broad management and business literature, new waves of
interpreting corporate governance and CSR, which have been on the increase,
have drawn insights from neo institutionalism (DiMaggio and Powell, 1983;
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Meyer and Rowan, 1977) and comparative business systems (e.g. Varieties of
Capitalism [Hall and Soskice, 2001] and National Business Systems [Whitley,
1998], in particular) perspectives. Despite their subtle differences (Tempel and
Walgenbach, 2007; Geppert et al., 2006) proponents of neo institutionalism and
comparative business systems argue that managerial thoughts and actions are not
only outcomes of managerial rationality, but are both enabled and constrained
by the contextual attributes of the institutional environments in which they are
crafted and executed. These contextual attributes could be in form of social
norms, beliefs, practices, routines, networks, regulations and other institutional
characteristics and influences. In other words, managerial actions and decisions are
socially embedded (Granovetter, 1985). Following this understanding, corporate
codes (as organisational artefacts and practices) can be interpreted as corporate
governance and CSR mechanisms, which are negotiated outcomes of interactions
between managerial discretion and institutional contexts; albeit the institutional
dimension appears to be under emphasised in the extant social accounting and
corporate social responsibility literatures.
Institutions have been objects of academic debates since the late 1960s primarily as a
re-visitation to the understanding of the contextual embeddedness of social activities
(Granovetter, 1985). Broadly speaking, Douglass North describes institutions as the
rules of the game (North, 1990, 1991). In a much more detailed fashion, Scott
(1995:48/49) defines institutions as multifaceted, durable social structures, made up
of symbolic elements, social activities, and material resources [which are] composed
of cultured-cognitive, normative, and regulative elements that, together with associated
activities and resources, provide stability and meaning to social life. transmitted by
various types of carriers, including symbolic systems, relational systems, routines, and
artifacts [and]. operating at multiple levels of jurisdiction, from the world system to
localised interpersonal relationships. In other words, institutions can be conceived of
as coordinating and or governance mechanisms (Grandori, 1997; 1996) with the
capacity to constrain and or enable actions at multiple levels (Grandori and Soda, 1995;
Crouch, 2005; Crouch et al., forthcoming; Djelic and Quack, 2008; Deeg and Jackson,
2006, 2007). Whilst both views of institutions could be said to be very broad in their
descriptions, an interesting point raised by Scott (1995) is the manifestations and
operations of institutions at multiple levels of jurisdiction. It is this layering of
institutions and their interactions that have continued to polarise the academic
community of practice on the study of institutions.
At the organisational field level, studies of institutionalization, de-institutionalization
and re-institutionalization (Ahmadjian & Robinson, 2001; Oliver, 1991, 1992) are
regularly featured in contemporary management studies and organisational theory. The
last couple of decades, for instance, have witnessed the blossoming of neo-
institutionalism and structurationism, in particular. Neo-institutionalism, places
emphasis on the study of organisational isomorphism, persistence and stability (Hirsch
and Lounsbury, 1997; Powell and DiMaggio, 1991) and seeks to demonstrate these
across contexts and time, while structurationism attempts to restore the equivalence in
significance attributed to both structure and agency in influencing either the stasis or
dynamics of an organisational field (Giddens, 1984; Lounsbury, 2002; Kaplan and
Henderson, 2005). Major examples of this research orientation, in which firms and
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industry variables, are primary objects of study are mainly North American tradition
and include such works as; DiMaggio and Powell, (1983); Granovetter, (1985); Scott
(1987); Powell and DiMaggio (1991); etc. At this level, the interest is mainly to account
for institutional isomorphism and recently on institutional change. It also focuses
attention on intra-organisational inertia and dynamics (Feldman and Pentland, 2003)
as well as changes in practices both at the firm and sectoral levels (Holm, 1995;
Hoffman and Ventresca, 1999; Hoffman, 2001; Suddaby, Cooper and Greenwood,
2007; Munir and Phillips, 2005).
Deriving mainly from the influence of European political economy and economic
sociology is another stream of literature that goes beyond the organisational field level
to account for national differences and embeddedness of economic actors. This stream
of literature pays more attention to variations in national governance of economic
activities and the level of integration of national systems to foster effectiveness at both
the organisational field and firm levels. Such researches include those on varieties of
capitalism (Hall and Soskice, 2001); national business systems (Whitley, 1998) and
national systems of innovation (Lundvall, 1988; Nelson, 1993). However, this stream of
research emphasises the role of private actors over and above the State, which is a
marked departure from the traditional view that the State is a major actor in the
distribution and re-distribution of economic gains and welfare in the national contexts
(Schmidt, 2002, 2003). Herein, the level of State participation in management of the
economy could be placed on a continuum running from high involvement (co-
ordinated markets) to passive involvement (liberal economies). It is assumed that where
the State is passive, the market system is strong and therefore has higher potentials of
yielding prosperous outcomes. However, there have been calls for the come back of the
State in economic coordination. The argument being that the State should not
continue to play a passive role but should be active in setting the rules of the game.
With the growth in strength of multi-national corporations (MNCs) and the tendency
towards misuse of such powers and resources, the thinking nowadays is that market
governance through self-governance of MNCs may not be completely adequate to
address negative externalities arising from over dependence on the market system
(Crouch, 2006). The State, it is argued plays a major role in internalisation of social
costs (in form of externalities) arising from market transactions.
This line of argument de-emphasises the traditional divide between the roles of the
State and the market in economic governance, and suggests a form of complementarity
between the two, in stead. With the ever expanding governance space spurred by
globalisation, it is becoming obvious that nation States are unable to unilaterally ensure
appropriate governance of economic activities, especially those driven by trans-national
actors (Aguilera et al., 2007). Therefore, different nation states are continuously forging
alliances and collaborations to ensure effective governance and sustained economic
growth. A clear example of such trans-national governance entities include the World
Trade Organisation (WTO), NAFTA, United Nations, the World Bank, the European
Union and other multinational institutions. Some of these governance infrastructures
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are championed by the nation States while others are driven by private interests (e.g.
Extractive Industries Transparency Initiatives
4
).
This section highlights some of the multiple dimensions and meanings brought to the
concept of institution by the new institutionalism movement. However, the
interactions between the different layers of institutions, on one hand, and the
influences of globalisation on national institutions, on the other, are still major issues
of debate in both academic and professional literatures. And opinions tend to converge
and or diverge on these issues depending on schools of thought and background
narratives supporting these opinions (Phillips et al., 2004) which lie beyond the scope
of this study. The next section will discuss the varieties of capitalism, as an aspect of
new institutionalism. This discussion is necessary as it constitutes building blocks to the
research problematique of this study.
HIGHLIGHTS OF VARIETIES OF CAPITALISM
As an offshoot of institutional theory, the Varieties of Capitalism (VoC) model
(Hall and Soskice, 2001) of comparative business systems, for instance, offers an
analytical framework towards understanding the political economy of firm
behaviour and performance. It explains variations and change within capitalist
systems through its broad dichotomization of institutional contexts into
Coordinated Market Economies (CMEs) and Liberal Market Economies (LMEs).
This line of thinking is championed by such scholars as Hall and Soskice
(2001), Vitols (2001), Hancke et al. (2007), Amable (2003), Whitley (1998),
Hollingsworth and Boyer (1997) and others. The central theme common to
these scholars works is their emphasis on the distinctiveness of national
institutional contexts in which firms operate, based on such indices as legal and
governance system, sources of finance and skills, training systems and the
influences of other social agents like unions and regulatory authorities.
However, it is not uncommon in comparative capitalism literature to stylise
coordinated market economies as stakeholder oriented and liberal market
economies as shareholder oriented (Dore, 2000). The CME is theorised to be
society oriented and firms within it thus focus on meeting broad range of
stakeholders needs (e.g. employees, suppliers, shareholders, etc), whereas the
LME is market oriented and focuses more on meeting shareholders needs than
those of any other stakeholder groups (Dore, 2000; Amable, 2003; Hall and
Soskice, 2001; Hancke et al., 2007; Vitols, 2001). Japan and Germany are usually
typified as examples of CME whereas UK and the USA are examples of LME
(Whitley, 1998). In this regard, it is argued that different national and
institutional contexts provide some sort of comparative advantages to firms
within them. And [T]he architecture of comparative advantage is portrayed in terms
of key institutional complementarities between labour relations and corporate
4
The Extractive Industries Transparency Initiative (EITI) supports improved governance in
resource-rich countries through the verification and full publication of company payments and
government revenues from oil, gas, and mining. The Initiative works to build multi-stakeholder
partnerships in developing countries in order to increase the accountability of governments
(http://www.eitransparency.org/section/abouteiti)
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governance, labour relations and the national training system, and corporate
governance and inter-firm relations. These relationships determine the degree to which
a political economy is, or is not, coordinated (Hancke et al., 2007:5). For example,
the power, legitimacy and urgency of a unionised work group to impact on the
activities of a firm would, for instance, depend on the complementarity between
the legal institutions and societal expectations in which such unions are
embedded in. Following this line of thinking, for example, corporate governance
systems could be therefore considered as complementary coalitions between
investors, employees and management (Jackson, 2005). Furthering their distinction
of CMEs from LMEs, Hancke et al. (2007:5) state that: The coordinated market
economy (CME) is characterized by non-market relations, collaboration, credible
commitments, and the deliberative calculation of firms. The essence of its liberal
market economy (LME) antithesis is one of arms length, competitive relations, formal
contracting, and supply-and-demand price signalling.
From a different, but albeit related, perspective, Fannon argues that a social model of
the corporation has existed in Europe for more than 30 years and is a pragmatic
expression of the Communitarian model of corporate law and its foundation. The ideas
of this model are reflected in many EU policy documents.
5
While the EU is like the US
in having many regulations protecting shareholders, the major difference between the
US and the EU approach is that the EU went further by facilitating the protection of
non-shareholding stakeholders in significant ways. Subsequent parts of this article
examine how these two different models and varieties of capitalism have reflected in
corporate codes of conduct of MNCs from these two regions (i.e. Europe and North
America) in the Nigerian oil and gas sector.
EMPIRICAL SITE
Nigeria has abundant natural and human resources, with a population of about 140
million
6
. The Nigerian economy is largely dependent on its oil sector which supplies
95% of its foreign exchange earnings. The primary sources of growth of the Nigerian
economy prior to the 1960s have traditionally been agriculture, industry and services.
During that era, cash crops were introduced, infrastructure was developed, and a
market for consumer goods began to emerge. At independence in 1960, agriculture was
the dominant sector, accounting for well over 50 percent of Gross Domestic Product
(GDP) and was the main source of export earnings and public revenue, with the
agricultural marketing boards playing a leading role. By the early 1970s, oil emerged as
the leading variable in the national economic scene. Since then, its dominance and
overwhelming importance has left Nigeria operating an almost mono-culture economy
5
For examples the EU Green Paper Promoting a European Framework for Corporate Social
Responsibility (2001) available at http://ec.europa.eu/employment_social/soc-dial/csr/greenpaper.htm
last visited 07/12/06; The EU Working Time Directive (93/104/EC) as amended by Directive
2000/34/EC and Council Directive 96/34/EC (1996) 0J L145/4 on the Framework Agreement on
Parental Leave, The Collective Redundancies Directive, The European Works Councils Directive, The
Acquired Rights Directive, Information and Consultation Directive, The Takeover Directive and the
European Company Statute
6
This is only an approximation. There is an ongoing population census at the time of writing this paper.
Page 11 of 34
with oil accounting for 78 percent of federal government revenue, more than 95
percent of export earnings and about 11 percent of GDP in 2000.
Despite her rich natural resources, Nigeria has a per capita income of around $390 and
life expectancy of 45 years (World Bank, 2006). A more graphic comparative data on
the socio-economic condition of Nigeria is presented in the table below:
Indices (2006) Nigeria Malaysia UK USA
Population (millions) 139.8 25.2 59.4 293.5
GNI per capita (atlas method, US$) 390 4,650 33,940 41,400
HDI
7
158 61 15 10
Poverty (Head Count Ratio)
8
92.4 9.3
Literacy (% of population age 15+) 67 89 >95 >95
GDP (US$ billions) 72.1 118.3 2,140.9 11,667.5
World Bank (2006)
The militarization of the Nigerian polity for over 30 years post-independence plunged
the country back in all indices of development. Nevertheless, the prospect for economic
growth and development looks bright despite the current problems facing the country.
It is anticipated that continued democracy will boost the confidence of the
international community in Nigerias future development efforts, and attract
investment, not only in the traditional sectors, but also in small and medium industries
where vast potentials exist. The Federal Government, in collaboration with multilateral
institutions and non-governmental organisations, is committed to re-establishing the
Nigerian State as an instrument for development rather than one of exploitation and
suppression. The challenge is to de-fragment the economy such that individuals are able
to raise productive investment to a level necessary to provide for a growth of national
income substantially in excess of the growth in population. To achieve this requires an
active and vibrant organised private sector.
Multinational corporations (MNCs) dominate major sectors of the Nigerian economy
including manufacturing, construction, petrochemicals and telecommunication.
However their impacts are most felt in the oil production and extraction industry.
Nigeria is currently the largest producer of crude petroleum in Africa, the 5th largest
producer within OPEC and the eighth largest exporter of crude oil in the world. Today
Nigeria earns over 95% of its export revenue from the oil and gas sector, which
accounts for over 40% of Gross Domestic Product. The major MNCs in Nigeria are
from Europe and the United States. According to the Nigerian Investment Promotion
Commissions website there are eighteen MNCs operating in the country.
9
However
some of the MNCs are new entrants who have interests in the deep offshore blocks in
partnership with other operators. The website listed the MNCs as follows:
Firms Year of entry into
Nigeria
7
UNDP, Human Development Index 2005.
8
World Development Report, 2006. Population living below $2 a day.
9
http://www.nipc-nigeria.org/opportunities.html last visited 25 November 2007
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Shell Petroleum Development Company Limited 1937
Mobil Producing Nigeria Unlimited 1955
Chevron Nigeria Limited 1961
Texaco Overseas Nigeria Petroleum Company Unlimited 1961
Elf Petroleum Nigeria Limited 1962
Philip 1964
Pan Ocean Oil Corporation 1972 Bought over
Ashland Oil Nigeria
Limited (1973)
Agip Energy & Natural Resources 1979
Abacan 1992
Amoco Corporation 1992
Chevron Exploration & Production Company 1992
Conoco 1992
Esso Exploration & Production Nigeria Limited 1992
Shell Nigeria Exploration & Production Company 1992
Statoil/BP Alliance 1992
Texaco Outer Shelf Nigeria Limited 1992
Total (Nigeria) Exploration & Production Company Ltd. 1992
Nigerian Investment Promotion Commission (2007)
It must be noted that some of these MNCs have merged there operations in recent
years. For example, Chevron has merged with Texaco to form ChevronTexaco. Conoco
merged with Phillips to form ConocoPhillips, while Total has also merged its
operations with Elf. All the foreign MNCs in the oil and gas sector operate in joint
venture partnerships and/or production sharing agreements with the Nigerian National
Petroleum Corporation (NNPC) a statutorily established, government owned
corporation. Typically, MNCs operate in Nigeria through locally incorporated
subsidiaries. The subsidiaries engage in joint venture partnerships with the Federal
Government of Nigeria through the NNPC. Shareholding interests in the venture are
typically in the ratio of 55-60% to the government and 40-45% to the corporation. The
shareholders of the parent company are usually in the countries of the North, mostly in
the United States and Europe. The MNCs maintain managerial control of the
enterprise. The Government contributes proportionately to the cost of carrying out the
oil operations and receive a share of the production in the same proportion.
Major MNCs operations in Nigeria
MNCs operation in Nigeria NNPC/Government
Interest
MNCs Interest
Exxon Mobil 60% Exxon Mobil 40%
Shell Petroleum Development
Company
55% Shell International
30%, Elf Petroleum
10%, Agip Oil 5%
Chevron Nigeria Ltd 60% Chevron Texaco 40%
Nigeria Agip Oil 60% Agip Oil 20%,
ConocoPhillips
Petroleum 20%
Elf Nigeria Ltd (Total) 60% TotalElfFina 40%
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Texaco Overseas (Nigeria) Petroleum
Company
60% Chevron 20%, Texaco
20%
Within the Nigerian context, criticism of the impact of the operations of corporations
on the people and the environment has played a significant role in the emphasis placed
on the adoption of codes. In an in-depth study of the origin of the commitment of
Shell Nigeria to stakeholder engagement, Boele, Fabig and Wheeler (2001) traced this
to the pressure placed on Shell Nigeria by the local communities on the environmental
impacts of its activities. Another reason is to gain competitive advantage over other
corporations with less social engagement (Frynas, 2005). In Nigeria for example,
companies endeared themselves to the government in order to be favoured in the
award of contracts by touting their social responsibility records. Corporations also
adopt codes as a way of demonstrating to their workforce that the company is a positive
force for change. As Frynas (2005) noted, local employees morale can be dampened by
the bad publicity a corporation generates. A strategic importance of the adoption of
codes is to forestall further regulation of corporate activities by law. In Nigeria, this may
not be a major factor as the government seem reluctant to impose further regulations in
order not to discourage foreign investments. Codes are also adopted as a Trade Union
avoidance strategy.
In the Nigerian scenario some major issues stand out as relevant within the local
context. These are environmental stewardship, bribery and corruption, labour
standards and human rights. The reasons for the prominence of these issues are
traceable to the challenges face by Multinational Corporation within the social-political
context within which they do business in Nigeria. As Boele, Fabig and Wheeler (2001)
pointed out in the case of Shell Nigeria, the need to address the agitations of the local
community and NGOs in respect of the impact of the corporations operations on the
environment play a major role in the shaping of its global corporate codes. But the
question remains to what extent these are more of reflections of MNCs home
country/regional influence than internalisation of international influences? Again the
rampant incidence of bribery and corruption in the business environment and the
complicity of MNCs in the practice make it expedient for corporations to distance
themselves from the practice by reflecting their stance against it in their codes.
10
The
10
In several reports in the past few years MNCs have been implicated in corrupt
practices of immense magnitude in Nigeria. A few examples would illustrate this point.
In 2003 Halliburton, a U.S based MNCs admitted to the Security Exchange
Commission in the US that low-level employees paid bribes to officials of Nigerias
Federal Inland Revenue Service in 2001 and 2002 to obtain favourable tax treatments.
Similarly an international consortium comprising Brown & Root (KBR) the British
subsidiary of Halliburton, Technips of France, Spamprogetti of Italy and JGC
corporation of Japan are being investigated for an allegation of offering USD 180
Million bribe to Nigerian officials to secure the contract to build the Bonny Island
Liquefied Natural Gas (LNG) Plant. Also in 2007 Vetco Gray Controls Inc, Vetco
Gray Controls Limited and Vetco Gray UK Limited wholly-owned subsidiary of Vetco
International Limited, all pleaded guilty to offering USD 2.1 million bribes to
employees of the Nigeria Custom Service. Similarly, a former manager of a U.S based
Page 14 of 34
emphasis on labour standards is as a result of both the development on the
international scene especially the influence of the ILO and also the constant dispute
between MNCs, their local employees and their trade unions. All these constitute a
dense configuration of corporate practices and motivations that require further
unpacking and deconstruction.
METHODOLOGY
The central question this paper sets out to address is whether CSR practices (proxied
through codes of conducts) amongst multinational firms in the Nigerian oil and gas
sector, are influenced by their home country model of capitalism and corporate
governance. In order to explore the central question of this paper, we examine the
codes of conduct of corporations from the two distinctive exemplars of varieties of
capitalism: the US and European Union/Western Europe. For ease of analysis, we have
clustered European countries together. However, this does not suggest a
homogenisation of these European countries but suggests that, following Matten and
Moon (2008) postulations, they would share more in common amongst themselves
than with the US with the exception of the UK, which is often classified along side
the US as exemplars of liberal market economies. Even at that, the UK also still retains
some elements of welfarism (Amaeshi, 2007).Firms were selected with particular nexus
to Nigeria. The firms that were selected for the analysis are large multinational
corporations who have engaged with CSR practices in their operations in Nigeria and
have codes of conduct. The MNCs are in partnership with the NNPC and appeared in
the 2007 edition of Fortune Global 500 to show their global reach and magnitude. The
companies chosen have turnover of over $17000 million. The researchers ensured that
these firms are all from the oil and gas sector for effective comparison and to minimise
industry biases (Griffin and Weber, 2006). The selection criteria gave rise to the
following MNCs: Exxon Mobil (US), ConocoPhilips (US), Royal Dutch Shell (UK and
Netherlands), ChevronTexaco (US), Total (France), Eni (Agip International)(Italy),
Statoil (Norway), ConocoPhilips (US).
One important point to note from the onset is that from the MNCs studied, their
codes of practice are usually not contained in one single document. For example in the
case of Shell, it has a Shell General Business Principle which governs how each of the
companies in the Shell Group conducts their affairs. It has a Shell Code of Conduct.
It then has a page dedicated to its approach to human rights which contains among
other things, its management primers and human rights compliance tools. Furthermore
Shell is a signatory to voluntary principles on security and human rights. The US
companies tend to have a more compact code. The Code of ethics and Business
Conduct of Exxon-Mobil is a four page document which covers its ethic policy,
conflicts of interest policy, the corporate assets and what it called procedure and open
door communication. However, we shall focus on primary code documents of each
Multinational, Wilbros Group Inc was indicted for giving USD 6 million bribe to
secure a USD 387 million contract to build gas pipelines in Nigeria. Most recently a
German Court ruled that Siemens paid bribe totalling 10 million Euros Nigeria
Page 15 of 34
selected corporation and where necessary, refer to secondary documents for
clarifications. For the purpose of this research we selected the following documents
from each company, which embody their codes of conduct for our analysis:
Firms Home Country Documents used Length of
Document
Scope of
Relevance
Eni/Agip Europe (Italy) Code of
Practice(2004)
59 pages Global
Royal Dutch Shell Europe
(UK/Netherlands)
Shell General
Business Principle
(1998)
Shell Code of
Conducts (2006)
10 pages
75 pages
Global
Total/Elf Europe (France) Code of Conduct
(2005)
26 pages Global
ConocoPhillips US Code of Business
Ethics and Conduct
(undated)
Codes of Business
Ethics and Conduct
for Directors and
Employees (2007)
22 pages
8 pages
Global
Exxon Mobil US Codes of Ethics and
Business Conduct
(undated)
4 Pages Global
Statoil US Code of Conduct:
We in Statoil (2005)
Ethics in Statoil
(2007)
Code of Ethics for
Senior Officials
(2004)
8 pages
36 pages
3 pages
Global
Chevron/Texaco US The Chevron Way
(undated)
Business Conduct
and Ethics Code
(undated)
2 pages
20 pages
Global
Like most studies in this area (e.g. Jose and Lee, 2007; Cormier et al., 2005; Belal,
2002; Ball et al., 2000; Unerman, 2000; Gray et al., 1995a,b; OECD, 2001), we adopted
a content analysis research methodology albeit an interpretative approach of the
technique (Hardy et al., 2004). The codes of conducts were content analysed, with
particular attention paid by the researchers to the themes, headings and emphases of
these codes. One of the researchers has legal expertise in both Nigerian and European
legal systems, which was useful in interpreting the code of conducts drawing from legal
insights. The two main guiding questions in the content analysis process were:
What are the issues addressed by the Codes of Conducts of MNCs operating in
Nigeria
Page 16 of 34
Are these codes reflective of the institutional framework of home countries and
do home countries institutional framework have impact on MNCs approach to
CSR abroad?
The content analysis yielded the following themes relevant to the Nigerian domestic
contexts, which are further discussed below: recognised stakeholders, extent of
application of codes, treatment of labour standards, reference to international
standards, enforcement and implementation.
FINDINGS AND DISCUSSIONS
RECOGNISED STAKEHOLDERS
Shell Nigeria, in its Shell General Business Principle gives a clear indication of its
recognition of other stakeholders apart from its stockholders.
11
The code identifies five
areas of responsibility to shareholders, customers, employees, business partners and the
society. Eni/Agip in its Code of Practice also stated that it carries out its operations
with the awareness of the social responsibility that the group has towards all of its
stakeholders: employees, shareholders, customers, suppliers, communities, commercial
and financial partners, institutions, industry associations and trade unions. Total also
explicitly recognise responsibilties towards shareholders, Customers, Employees,
Suppliers, Service Providers and Business Partners and Host Countries. Similarly Total
in what it titled the Ethics Charter annexed to its code identifies the stakeholder to
which it is accountable as: shareholders, customers, employees, suppliers and partners
and the civil society.
The above company codes can be contrasted with the codes of Chevron Texaco, Exxon
Mobil, Conoco Phillips and Statoil. The Chevron Texaco code does not identify
specifically the stakeholders recognised by the corporation. The corporation rather
identified these vaguely in its vision statement where it stated as one of its aims the
desire to earn the admiration of all its stakeholders which are stated to be investors,
customers, host government, local community and employees. Exxon Mobils Code of
Ethics and Business Conduct
12
makes reference only to the corporation, directors and
officers and place more emphasis on its expectations of its employees than any
attention to other stakeholder issues. The position of Exxon-Mobil and ChevronTexaco
are highly consistent with US institutional framework. ConocoPhillips however differs
from the other US companies because it explicitly stated in p.2 of its code that the
company have responsibility towards shareholders, customers, families, vendors and
suppliers and host communities.
The Statoil code is similar to the US MNCs here. Statoils code which is contained in
its document titled We in Statoil only states in the opening statement by the
corporations president and CEO that we will build an even stronger Statoil for the
11
The Shell General Business Principle is incorporated in the Shell Code of Conduct, 2006 (p6) The
Code of Conduct is complimentary to the Shell General Business Principle, which the Code elaborated
upon.
12
See Appendix E
Page 17 of 34
benefit of our people and our stakeholders. In its recently published Ethics in Statoil
the company did not clarify the issue of stakeholders but went on to say that its ability
to create value is dependent on applying high ethical standards as the basis of a trust
based relationship with the community, owners, employees, partners, customers and
suppliers. The approach taken by Statoil may be explained by the fact that Norway is
not within the EU and does not share the same corporate governance model. Already
there appears to be significant differences between the EU companies and the US
companies approach. While the EU companies easily concede to responsibility
consistent with the prevailing model of corporate governance and capitalism in Europe
to other stakeholders in their Codes, there appears to be reluctance on the part of US
to make explicit commitments.
EXTENT OF APPLICATION
The codes also differ in the extent to which they are to be applied. The Shell Code is to
be applied by all the companies in the group. It is also applicable to contractors,
consultants and partners. According to the Company:
Every employee, director or officer in every wholly-owned Shell
company and in every joint venture company under Shell control must
follow the Code of Conduct. Contract staff must also follow the Code.
Contractors or consultants who are our agents or working on our behalf
or in our name, through outsourcing of services, processes or any
business activity, will be required to act consistently with the Code
when acting on our behalf. Independent contractors or consultants will
be made aware of the Code as it applies to our staff in their dealings
with them. We apply the Code in all joint operations where Shell is the
lead operator. When participating in a joint venture company not
under Shell control we encourage the company to adopt similar
principles and standards.
Similarly, Total Oils Code of Conduct is designed to govern the company and its
subsidiaries in more than 130 countries where it does business. The company expects
its suppliers, service providers and business partners to adhere to principles equivalent
to those in its Codes. The scope of applicability of the Eni/Agip Code is very wide.
According to the Code, the rules of the Code are applicable to each and every Eni
employee without exception and to all those who work for the achievement of Enis
objectives (p.3). The code explicitly addresses the scope of the applicability of the Code
to third parties. Furthermore the code went on to say that External collaborators
(including consultants, representatives, agents, brokers etc.) are required to comply with
the Codes Principles (p.27).
The US MNCs again are different in this respect. The ChevronTexaco code is vague on
the scope of its applicability. Also the ConocoPhillips Code focused on responsibility
and accountability of employees without stating directly the scope of the applicability of
its code. This approach is followed by ConocoPhillips Code of Business Ethics and
Conduct for Directors and Employees of 2007. The ExxonMobil codes are silent on
the scope of its applicability. In the case of Statoil, the company extends the
Page 18 of 34
applicability of its ethical standards to suppliers and partners in an indirect way. It
provides in paragraph 3.3 of its Ethics in Statoil that it expects its suppliers and
partners to adhere to ethical standards which are consistent Statoils ethical standards.
The company further has a supplementary code: Statoil ASA Code of Ethics for Senior
Financial Officers, which as the title suggests is designed for Senior Financial Officers.
In this regard the Statoil Code has some similarity with other European MNCs. Again
it is apparent that there is a divergence as to the provision on the applicability.
TREATMENT OF LABOUR STANDARDS
There is no consistency in the treatment of labour issues in the codes. However, the
European MNCs seem to deal with such issues more elaborately than US companies.
Significantly, in Nigeria, the Shell code is further adapted to fit local situation through
supplementary documents which address in details issues such as bribery and
corruption, environmental standards and human rights.
13
However, this adaptation was
significantly not extended to some labour issues relevant in the local context. Issues
concerning casualization and contract staffing and job security are for instance not
covered by the code. Furthermore, the code does not clarify whether the corporations
responsibility to its workers is limited to its direct employees or whether the provisions
on labour standards should be extended to persons employed by suppliers or
subcontractors. Again, while the Statement of General Business Principle generally
states that the corporation pledges to respect the human rights of its employees, it fails
to commit the corporation directly to important issues such as freedom of association
or right to unionize, collective bargaining, wages, hours of work and training.
14
Other EU based MNCs followed similar pattern. The Total Code pledges the
corporations commitment to pay particular attention to employees working
conditions, respect individuals, avoid discrimination and protect their health and
safety. It further states that it fosters equal opportunity by recruiting personnel solely on
the basis of its requirement and the qualities of individual candidates. The Eni Code
commits the company to developing the abilities and skills of each employee, equal
opportunity, the policy of non-discrimination and good working condition. The code
further states that there should be no discrimination and harassment in the work place.
U.S based MNCs have less detailed commitment in this area when compared with the
EU based MNCs. The ChevronTexaco code addresses generally the issues of wage
policy and tenure, non-discrimination, equal opportunity, harassment and work place
violence. The corporation categorically states that it does not guarantee employment for
any particular period of time for any of its employees thereby taking job security out of
its purview. As noted earlier, the Exxon Mobils code is a rather brief document. The
code places more emphasis on its expectations of its employees rather than any
attention to workers right or labour standards. The nearest the code came to
addressing employees concern is the opportunity given to employees to ask questions,
13
See http://www.shell.com/home/Framework?siteId=envirosoc-en&FC2=&FC3=/envirosoc-
en/html/iwgen/society/human_rights/dir_human_rights_16042007.html last visited 25 November
2007
14
However the corporation in a section of its website claimed that it has developed a people strategy
under which it has subscribed to the ILO declaration on fundamental principles and rights at work.
Page 19 of 34
voice concerns and make appropriate suggestions concerning the business practices of
the corporation.
15
The Statoil Code Code is also very brief in respect of issues relating
to employees. In its Ethics Charter, the company pledges to show respect for all
individuals, ensure a good working environment characterised by equality and diversity
and rejects all form of discrimination. ConocoPhillips treatment of labour issues is
slightly broader than other US companies. It commits the company explicitly to equal
opportunities, harassment-free workplace, and safe and healthy environment.
REFERENCE TO INTERNATIONAL STANDARDS
A similarity in all of the codes from the Europe is their reference to international
instruments as the source of inspiration for the codes. According to Enis code (p.3),
the company reaffirms its commitment to operate within the framework of the United
Nations Universal Declaration of Human Rights, the Fundamental Conventions of the
ILO International Labour Organization and the OECD guidelines on
Multinational Enterprises. Total made similar commitment in its business principles.
Though the Shell Code had no direct reference to these standards in its codes, it is
mentioned in other supplementary documents on its webpage. The US companies do
not generally follow this trend, which could be due to the fear that such explicit
commitment may be used against them in the highly litigious American society as was
the case in Kasky v Nike (02 C.D.O.S 3790) where Nikes advertisement, reports and
other public statements led to costly litigations.
ENVIRONMENTAL ISSUES/BRIBERY AND CORRUPTION
Two areas where all the codes examined have similar commitments are in their
commitments to Environmental issues and the prohibition of bribery and corruption.
The only exception in relation to environmental standards is Exxon-Mobil.
16
All the
other codes made explicit commitment to environmental stewardship. This may be
explained by the international focus on global warming in recent times (Amaeshi,
2007). MNCs in both the US and the EU have been taken steps to portray themselves
as being environmentally responsible. Similarly all the codes have express provisions
prohibiting bribery. This again can be explained by the global focus on the area and the
different national and international initiatives targeted at making MNCs more
transparent.
ENFORCEMENT AND IMPLEMENTATION
15
In 2005, the shareholders of Exxon Mobil Corporation urged the Board of Directors of the
corporation to adopt and implement a company wide workplace human rights policy based on the ILOs
Declaration of Fundamental Principles and Rights at Work. Till date the corporation has not has not
incorporated the ILO declaration into its code.
http://www.iccr.org/shareholder/proxy_book05/PROMOTING%20HUMAN%20RIGHTS/ILO_EXX
ON.HTM last visited 24 November 2007
16
It has been argued that Exxon-Mobil is resisting proactive policies on climate change. See I.H
Rowlands Beauty and the beast? BPS and Exxons positions on global climate change (2000) 18 (3)
Environment and Planning C: Government and Policy 339-354
Page 20 of 34
In demonstrating enforcement and implementation of their corporate codes, both
European and US MNCs generally rely on internal compliance processes which, in
some instances, are combined with monitoring procedure by appointed private
corporate thirdparty labour monitors. The trend however in the codes of MNCs
examined is a general reliance on internal procedures. The Statement of General
Business Principle of Shell International provides for a good faith commitment which
is at the discretion of the corporation and its subsidiaries to implement and enforce.
Shell Nigeria implementation process as stated on its website are as follows:
We monitor compliance through an annual assurance letter process. It
requires the relevant senior manager to report to the Chief Executive on
the performance of his or her business or function in following our
Business Principles and Group Standards. Results are reported to the
Audit Committee of the Board.17
The hallmark of the above is that the corporation largely relies on internal monitoring
system. However this only makes the corporation the law maker and the judge of itself
on the basis of the rule it made without subjecting it to any independent and objective
external evaluation. It thus seems that these initiatives by Shell Nigeria may lack
transparency. For example, Christian Aid (2004) carried out a research in which it
focused on the compliance of Shell with its environmental commitment as it stipulated
in its code. Its finding was that despite the companies claim to be observing CSR
standard the reality in practice was different. The study found that despite Shells
claims that it has turned over a new leaf in Nigeria and strives to be a good neighbour,
it still fails to quickly clean up oil spills that ruin villages and runs community
development projects that are frequently ineffective and which sometimes divide
communities living around oilfields.
The Eni Codes start from the point that compliance with code form part of the duty of
a worker under Article 2104 of the Italian Civil Code. Any violation of the Code rules
may therefore be considered as a violation of primary obligations under labour relations
or rules of discipline. Violations could thus have legal consequences including
termination of the work contract and reimbursement of damages (p21). To ensure
implementation and compliance with the codes Eni established the office of the
Guarantor of the Code of Practice and a Committee for the Code of Practice. The
Guarantor is to, among other things, establish criteria for compliance, promote the
publication of guidelines and operational procedures, organize information and
training programmes on the Codes objectives, investigate reports of any violation,
make proposals as to the dissemination and updating of the codes, et cetera. The
Committee for the Code of Practice is to evaluate the Guarantors proposals for the
dissemination and updating of the Code, analyze yearly report on the Code
implementation and suggest ways to prevent any recurrence of violations, to review the
actions of the Guarantor where it is alleged that no proper action has been taken or
17
http://www.shell.com/home/content/envirosoc-
en/making_it_happen/controls_incentives/controls_incentives_13042007.html last
visited 13 November 2007
Page 21 of 34
where there is a retaliation against an employee for reporting a breach. This structure is
expected to be created in all Eni companies (p21).
Similarly compliance with the Total code is to be monitored by an Ethics Committee
made up of a chairman and four members. The job of the committee is largely advisory.
The ChevronTexaco code also provides for internal enforcement procedure. It states
that the corporation has appointed a Corporate Compliance Policy Committee to
monitor compliance. Similarly, the ConocoPhillips Code views the implementation of
Codes from an employment contract perspective. According to its code [A]s a
condition of employment, every employees personal responsibilities include:
Complying with all applicable laws and regulations
Complying with all applicable Company policies
Maintaining appropriate ethical behaviour
Reporting any suspected misconduct, illegal activity, fraud, abuse of
Company assets or other violation of ethical standards
Annually submitting an ethics compliance certification
Employees of the company are required to complete an Ethics Compliance
Certification annually.
The Exxon Mobil Code leaves enforcement matters within the responsibility of
management. Statoil established Ethics Committees and compliance officers to
monitor compliance. The corporate executive committee constitute the groups ethics
committee. These committees are replicated in the companys subsidiaries. The head of
corporate audit is named as the groups corporate compliance officer. Each business
area of Statoil is expected to appoint a compliance coordinator for follow up activities.
In a nutshell, therefore, enforcement and implementation is an area where all the codes
examined are similar. They all favour internal mechanism for control and do not make
provisions for external monitoring. This reinforces the question of managerial capture
of CSR (Owen et al., 2000) and also raises the need for institutional governance of
CSR practices.
Page 22 of 34
SUMMARRY OF FINDINGS
MNC Home
Country
Recognition of
other
Stakeholders
Extent of Application
of Code
Treatment
of Labour
Standards
Commitment
on
Environmental
Issues
Enforcement and
implementation
Reference to
International
Human
Rights
Standards
Prohibition
Of Bribery
And
Corruption
Degree of
alignment
with home
country
model of
capitalism
Exxon-Mobil U.S Vague Vague Vague Yes Internal procedure:
less detailed
No Yes High
ConocoPhillips U.S Yes Vague Less
detailed
Yes Internal procedure:
less detailed
No Yes High
Royal Dutch Shell U.K &
Netherlands
Yes The parent company,
all subsidiaries,
contractors,
consultants and
partners
Detailed Yes Internal procedure:
less detailed
Indirect Yes Mixed
Chevron/Texaco U.S Vague vague Less
detailed
Yes Internal procedure:
less detailed
No Yes High
Total France Yes Parent Company,
subsidiaries
Less
detailed
Yes Internal procedure:
less detailed
Yes Yes High
Eni/Agip
International
Italy Yes Parent company,
subsidiaries, third
parties including
constituents,
representatives and
brokers
Less
detailed
Yes Internal procedure:
detailed
Yes Yes High
Statoil Norway Vague Less
detailed
Yes Internal procedure:
less detailed
No Yes Mixed
Page 23 of 34
VARIETIES OF CAPITALISM AND CORPORATE SOCIAL RESPONSIBILITY PRACTICES
Although the varieties of capitalism model is not a unified theory of everything
(Hancke et al., 2007:8) it has been used as a theoretical lens to study such themes as
innovation (Crouch et al., forthcoming), corporate governance (Aguilera and Jackson,
2003; Aguilera, 2005; Goyer, 2007; Borsch, 2007), flows of financial investments
(Goyer, 2006), macroeconomics (Soskice, 2007), corporate strategy (Lehrer, 2001),
social protection and the formation of skills (Estevez-Abe et al., 2001), patterns of
labour market (Wood, 2001) and standardization (Tate, 2001), globalisation (Crouch
and Farrell, 2004; Martin, 2005; Panitch and Gindin, 2005; Pontusson, 2005) and
recently on corporate social responsibility (Matten and Moon, forthcoming). There is
also an ongoing attempt to apply the framework to understanding corporate
stakeholder salience (Chapple and Gond, 2006), to mention but a few. This paper has
sought to apply the VoC framework to understanding the stickiness of corporate
home country influences across trans-national spaces. The findings of the study are
corroborated by outcomes of similar studies.
Aaronson and Reeves (2002) conducted a comparative research of CSR practices in
Europe and US. The research underscores the trend in Europe policy making of
promoting CSR initiatives and the absence of similar development in the US.
Furthermore, the research shows that European Companies are more receptive to these
policy initiatives than the US companies. The differences the researchers argued are
due to the differences in the business culture of the regions. While the EU companies
recognise the need for government to ask more of them, the US companies do not and
would prefer governments role to be kept to the minimum. Also in describing the
differences between European model of CSR and the US Model, Matten and Moon
(2008) subscribed to the view that there is an explicit CSR model in the US as
opposed to an implicit model in EU. The difference being that while the explicit
model rely on voluntary actions by corporations, the implicit model came about as a
result of formal and informal institutional framework of the society which define the
role of business and allocate responsibilities.
18
Explicit CSR would include voluntary,
self-interest driven policies, programmes and strategies by corporations. Implicit CSR
includes of values, norms and rules which result in requirements for corporations to
address other stakeholder issues.
In summary, the findings of the study suggest that most firms in both CME and LME
tend to retain their home country influences on their CSR practices even when they
operate outside their national boundaries. On one hand, the continental European
firms such as Total/Elf, and Eni/Agip reflected those fundamental attributes of the
CME model e.g. recognition of broader stakeholder groups, emphasis on labour
conditions and human rights. The LME firms, on the other hand, showed less or vague
interests in these in line with the espoused characteristics of LME in the extant VoC
literature. Although they varied from their home country characteristics in certain areas
(e.g. ConocoPhillips showed stakeholder orientation contrary to the typical shareholder
orientation of LME), these changes could be argued to be insignificant. The UK firm
18
Note however that the authors further argued that the explicit model is fast gaining ground in Europe.
See Matten and Moon A Conceptual Framework for Understanding CSR
Page 24 of 34
Royal Dutch Shell (as well as the Norwegian Statoil) showed mixed characteristics of
both CME and LME and tends to reflect their characteristics at different point in time
to adapt to local conditions in Nigeria. This adaptive capability could be as a result of
the companys long period of time in the Nigerian oil and gas sector, and nonetheless
could be associated to the strategic political connection of the firm to the Nigerian
government (Frynas et al., 2006). Even at that, one could argue that the firm to an
extent also reflects the institutional characteristic of the UK capitalist system that tends
to mimic both the welfarist orientations of CMEs and the free market orientation of
LMEs. This has led us to theorise the UK capitalist economy as a mixed one. In other
words, it could be argued that despite the wave of changes initiated since the Thatcher
days, the UK still has come to find a third-way (a middle ground) (Giddens, 2000) that
stands it out as a unique capitalist system. The mixed nature of this capitalist system
allows it high degree of elasticity to adjust to the demands and challenges of local and
trans-national socio-economic spaces. A good example of this high degree of elasticity is
manifested in the case of the Royal Dutch Shell that is able to cherry-pick items of its
code of conduct in order to maximise its investments in Nigeria (e.g. Shell de-
emphasises casualisation of labour, which is contrary to the dominant European model
of corporate governance). We have sort to reflect this degree of elasticity across the
spectrum of VoC in the schematic below.
The findings of this study reinforce the notion that corporate governance and CSR in
EU member states differ in some respect from each other. The UK system has more in
common with the US when compared with other European models hence the common
nomenclature Anglo American Model. The UK model is however shifting towards the
stakeholder model of the corporation. In other European countries, the dominant
corporate governance models are the Communitarian model and the stakeholder
models of the corporation. The link between the two models is the extension of the
CME Mixed LME
Low adaptive
elasticity
Low adaptive
elasticity
High adaptive
elasticity
Consistency with
home country
characteristics
Consistency with
home country
characteristics
Flexibility to home
country characteristics
Description
Degree of
elasticity
Varieties of
Capitalism
Page 25 of 34
responsibilities of the corporation to other constituent groups (Broberg, 1996,
Donnelly et al, 2000, Gamble and Kelly, 2000). A general trend, therefore, in the
communitarian and stakeholder model is the link between a public interest agenda and
increased responsiveness to other stakeholders issues. The implication of this
distinction was explained by Lynch-Fannon (2003) when she analysed the different
outcomes regarding the treatment of employees interests within the US and the EU
corporate structure. She posited that the question goes back to whether the corporation
should be regarded as a private or public actor. According to her,
It is accepted in the policy documents of the EU that corporations play a
public role The Corporation is not considered to be simply a private actor
in the market place and this is accepted. The acceptance of the corporation
as a public actor of course immediately assumes legitimacy for the efforts of
the legislatures (both national and supra-national) to regulate corporate
activity as it effects many aspects of life, not least the welfare of EU
workers19
The US corporate governance system is founded on the Contractarian model. The
Contractarian school is based on the law and economics contract theory, which sees the
corporation as a microcosm of the larger market place (Lynch-Fannon 2003). The
model has its foundation in the liberal-utilitarian model of Hobbes, Locke, Smith,
Bentham and Mill. The liberal-utilitarian model emphasizes the primacy of the law in
protecting rights and enforcing contracts. The theory conceives the company as a
vehicle for contracting where each constituency is placed within a contractual paradigm
that only recognises bargained rights (Lynch-Fannon, 2003). According to the theory
the sole purpose of the corporation is to maximise shareholders profit. All other
constituencies within the corporation are protected to the extent of the provisions of
their contracts. To the Contractarian model, the role of the state in corporate
governance is primarily to provide efficient default rules from which shareholders can
choose to depart, and the few mandatory legal rules that do exist to restrain corporate
behaviour are subject to evasion by choice of form (Winkler, 2004). Markets thus, to a
large extent, set the terms of corporate activity, not the law. The role of the law is
therefore nothing more than to provide a set of loose contractual rules to assist a
collection of individuals pursue their self-interests in a free market (Mitchell, 2001).
This theory forms the basis of the neo-liberal view of writers such as Friedman (1962)
who propose that the pre-eminent purpose of the corporation is to make profit for
stockholders. This is the classical foundation on which the corporation is based in the
United States (Williams and Conley, 2002). The approach is exemplified in the US
where regulations generally favour protection of shareholders and it explains the many
regulations about disclosure and other governance matters relating to shareholder-
management relationships such as the Sarbanes-Oxley Act of 2002. This school of
thought has been the obstacle for decades against realisation of other stakeholder
protection within the corporate governance structure by discouraging the inclusion of
other stakeholders issues in its scope. The school has focused corporate governance on
the relationship between shareholders and managers (directors and officers). It has been
Page 26 of 34
suggested in the U.S that the history of corporate law is at an end and that the
shareholder-oriented model has emerged as the normative consensus (Hansmann and
Kraakman, 2001).
CONCLUSION
Multinational Corporations (MNCs) stand out as major economic actors in the global
economy, being amongst the top10 richest entities in the world and far richer than
most developing countries. This economic position gives MNCs significant power and
influence in the current world order. It has been argued and demonstrated through this
study that MNCs carry with them attributes of their national business systems as they
forage into markets outside their nation states; and since most MNCs are from the
developed countries, this global reach of MNCs offers them the opportunity to drive
the free market varieties of capitalism to a likely global convergence. In other words, it
can be argued that while MNCs are profit driven, they also have an incentive to
synchronise the business systems of their external markets to the business systems of
their nation states to enable the development of complementary institutions in the
external market to further drive the profitability of MNCs. This non complementarity
and weakness of institutions in developing countries have been singled out as one of
the major risk factors that discourage inflow of investments to third world countries.
They have been identified also as a major challenge inhibiting developing countries
from effectively integrating their economies into the global economy. This inability to
competitively compete in the global economy has left the third world countries,
particularly Africa, in a state of poverty and impoverishment.
Despite the restricted generalizability of the findings of this study due to limitations
arising from the number of cases used, the study has provided some insights into the
interaction between corporate home country and or regional influences on CSR
practices of MNCs. It is anticipated that some of the findings and theorisation of this
study will open new vistas for the study of MNCs CSR practices, and offer some
testable propositions amenable to varieties of research methods and institutional
contexts.
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